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Gov. Andy Beshear on Friday signed legislation that will lower the state income tax rate to four percent on Jan.1, 2024, despite having reservations on the measure, in a post on social media.

During the 2022 regular session, lawmakers passed House Bill 9, which provided for half-percent reductions in the income tax rate, which could eventually reach zero, based on the state’s financial situation.  The Democratic governor vetoed the measure, but the Republican legislative super-majority overrode the veto, so the rate dropped from 5% to 4.5%, effective Jan. 1 of this year.

This year, legislators adopted House Bill 1, which lowers the rate to 4%, and this time Beshear signed it into law.

In a Facebook video, Beshear said he would have preferred a reduction in the state sales tax, but the General Assembly didn’t see things his way, and in fact, lawmakers removed exemptions from sales tax in three dozen categories.

“What I’m faced with is a bill that would lower the income tax that has some long-term repercussions for potentially funding state services but will at least put a couple hundred dollars in the pockets of most Kentuckians, at a time when they need it,” he said.

He noted that even with the one-half percent income tax cut taking effect, January revenues were still strong, adding, “I have one bill in front of me, about whether or not we can help our people at this time of high inflation. So today, I’m going to sign House Bill 1. I hope this helps everybody, at least a little bit.”

Reacting to the bill signing, the House Democratic Caucus issued a statement saying, “Last year, our caucus favored two other tax-cut proposals that would have benefited more Kentuckians more quickly, with one temporarily lowering the sales tax and the other issuing rebate checks. We still think those are much better options, and neither would have put a permanent hole in state spending for schools, public safety and critical health and human services.”

The sponsor of HB 1, Rep. Brandon Reed, R-Hodgenville, stated, “Last session the Kentucky legislature took a bold step towards tax modernization with the passage of HB 8, despite the Governor’s veto.  As a result, Kentuckians across the Commonwealth saw their individual income tax rate decrease from 5 % to 4.5% on January 1, a tax cut that leaves approximately $625 million a year in the paychecks of working men and women and makes our state more competitive for jobs, workers, and economic investment.  HB 1 ensures that we take the next step by lowering the rate to 4% in 2024.  Building a strong economy today is how we afford the progress we want for tomorrow.  To accomplish that, we must focus on policies that empower working Kentuckians instead of continuing with the status quo.

“I appreciate the Governor signing this measure, as well as his attention to the fact that the legislature’s efforts to reform our state’s tax code and pass policies to make the state more competitive are paying off for Kentuckians. However, I also want to point out that this money belongs to the people of Kentucky. They earned it, not their state government. We are merely the trustees of these resources and we are obligated to investing each dollar responsibly.”